Steve Liles, PharmD Senior Director, Value Based Purchasing Magellan Medicaid Administration

Transcription

1 Medicaid Drug Rebates Steve Liles, PharmD Senior Director, Value Based Purchasing Magellan Medicaid Administration

2 Medicaid Drug Rebates History of Medicaid Drug Rebates and Preferred Drug Lists Affordable Care Act Setting the Record Straight Drug Rebates and Managed Care Formulary Management

3 History Medicaid Drug Rebates and Preferred Drug Lists

4 OBRA 90 Enacted 1/1/91 /9 Medicaid most favored customer status Manufacturers required to sell drugs to Medicaid at BP States required to cover products Explicitly l excludes drugs dispensed dby MCOs Savings projections $3.5 billion over first five years Savings realized $19.8 billion in first ten years 2008 $8.9 billion (37.2% of expenditures)

5 OBRA 90 Rebate Two elements (for single source and innovator multiple source drugs) Basic rebate greater of a) 12.5% of AMP and 2) AMP BP Additional rebate the amount by which the increase in the AMP from the base period exceeds the increase in the CPI U Baseline AMP 7/1/90 Non innovator multiple source drugs Basic rebate only = 10% of AMP

6 Medicaid Drug Rebate History Veteran s Health Care Act of 1992 Increased basic rebate for single source drugs to 15.7% of AMP 50% of AMP cap removed 1994 = 15.4% Non innovator = 11% 1995 = 15.2% 1996 = basic rebate set at 15.1% of AMP

7 Prescription Drug Spending 1997 to 2001 Medicaid d expenditures epedtueso for prescription drugs grew more than twice rate of total Medicaid spending Cost control measures Reduce pharmacy reimbursement Quantity limits Generic substitution Cost sharing Provider education DUR

8 Florida Medicaid PDL Florida law effective 7/1/2001 Rebate required to have drug included on formulary Minimum rebate lesser of 10% AMP or total rebate 25% Alternative = Value Added Programs provide disease management and other services that guarantee savings Opposition Drug formularies shift costs due to increase hospitalizations, ED/office visits Clinical considerations secondary to rebates Physicians i administrative i ti burden HIV/AIDS and mental health advocacy pushed for exemption PhRMA filed suit in August 2001 HHS approved SPA in September 2001 Federal court let law stand in January 2002 did not prevent access to non preferred drugs

9 Michigan Medicaid PDL Michigan PDL signed into law July 2001 Reference Pricing Two drugs in each class named best based on clinical effectiveness and safety Preferred Other drugs could offers supplemental rebates to bring cost down to lowest priced Preferred drug Manufacturer must also provide discount for other non Medicaid programs January 2002 ruled in favor of PhRMA 2002 PDL implemented March 2003 court upheld law April 2004 PhRMA, et al v. Tommy Thompson, et al. court ruled in favor of state state can "establish a Medicaid prior authorization program in order to secure rebates on drugs for non Medicaid populations if a state demonstrates, through appropriate evidence, that the prior authorization program will further the goals and objectives of the Medicaid program.

10 Preferred Drug Lists (PDLs) Jan Oct states enacted legislation pertaining to Medicaid PDLs, PA, SR, generic drug substitution, co payments, prescribing/dispensing limitations September 2002 CMS issued dsmdl "states may enter separate or supplemental drug rebate agreements" states may subject covered outpatient prescription drugs to prior authorization as a means of encouraging drug manufacturers to enter into" supplemental drug rebate agreements states had PDLs

11 Pharmaceutical Bulk Purchasing Pools 2003 National Medicaid Pooling Initiative (NMPI) started with four states states 2004 Top Dollar Program (TOP$) started with three states states 2005 Sovereign States Drug Consortium (SSDC) started with three states states

12 Medicaid Expenditures and Rebates Year Expenditures (in billions) Federal Rebates Net Expenditures Federal Rebates Supplemental Rebates (in billions) as % of Expenditures 2005 $43.2 $11.2 $ % 8% 2006 $22.5 $ 8.6 $ % 7% 2007 $22.6 $ 6.6 $ % 6% 2008 $24.0 $8.0 $ % 6% 2009 $25.6 $9.0 $ % 4%

13 Affordable Care Act

14 Affordable Care Act 2010 Revised definition of AMP Limitation to retail community pharmacies resulting in higher AMPs Increased minimum base rebate to 23.1% of AMP for innovator drugs Capped at 100% of AMP 13% for non innovator multiple source drugs Additional rebate redefined for new formulations of oral solid dosage forms (line extensions) Greater of amount computed under existing law or highest additional rebate (as % of AMP) for any strength of the original product Applies to authorized generics

15 Affordable Care Act CMS to offset the increase in Federal Rebates directly related to ACA CMS reports quarterly Unit Rebate Offset Amount CMS reports quarterly Unit Rebate Offset Amount (UROA) to states to calculate offset

16 Affordable Care Act FUL calculation cu at changed gedto no less than 175% of weighted average of most recently reported monthly AMP Applies when >2 equivalent products available for purchase nationwide by retail community pharmacies Previously 150% of lowest publishedprice price DRA (not implemented) 250% of lowest AMP Requires CMS to disclose weighted average of most recently reported monthly AMP for multiple source drugs

17 Affordable Care Act Draft FULs 40% lower than average SMAC Top 20 drugs in severallargeffsprogramslarge Nearly ¾ of FULs lower than SMACs Majority of drugs <$0.10 per unit Minimal impact on pharmacy profit GAO reports that the new formula adequately reimburses pharmacies for acquisition costs of multiple source drugs

18 Affordable Care Act Impact on Rebates Federal Rebates Supplemental Rebates Rebate Offset Total Net Rebate Pre ACA %reimbursement 46% 3% 49% $/Rx $31 $2 $33 Post ACA %reimbursement 53% 3% 5% 51% $/Rx $37 $2 $3 $36

19 Setting the Record Straight

20 Lewin Group Report Potential Federal and State by State Savings if Meicaid were Optimally Managed published December 2010 Funded by PCMA Mdi Medicaid idffs focus on rebates Medicare PDPs, MCOs, state employees use PBMs to negotiate pharmacy reimbursement Projected 14.8% reduction in prescription costs if Medicaid FFS adopted commercial like approach DF, ingredient costs, drug utilization, GDR Total savings of $30.3 billion over 10 years

21 Lewin Report GDR Generic Dispensing Rate Stated FFS 68% vs MCOs 80% Actual FFS GDR = 73 74% 74% Range = 64 80% Dispensing Fees Stated FFS $4.81 more than twice commercial Actual = Brands $3.99 ($ ) 750) Generics = $4.23 ($ )

22 Real World Analysis SAVINGS AS % OF 2011 NET EXPENDITURES AVERAGE MEDIAN REDUCTION IN DF 1.6% 1.5% REDUCTION IN BN ING COST 2.0% 0.0% INCREASE IN OGER 7.4% 6.1% INCREASE IN GDR 4.2% 4.1% DECREASE IN UTILIZATION 2.5% 2.6% LESS INCREASED ADMIN FEES (5.8%) (5.7%) TOTAL 12.0% 9.7% Over 1/3 of states <5% savings Over 1/3 of states <5% savings Nearly 1/4 of states >20% savings Reduced pharmacy reimbursement accounts for vast majority of savings Increase OGER most notable

23 American Enterprise Institute Report Overspending on Multi Source Drugs in Medicaid by Alex Brill published March 2011 Medicaid wasted $329 million ($95/Rx) in 2009 by paying for brands of 20 drugs instead of generics Estimated Federal Rebate of 15.1% Failed to account for additional rebate

24 Real World Analysis Considering additional rebate 100% utilization of generics for the 20 drugs would actually have cost Medicaid $80 million ($23/Rx) Only 9 of 20 generics had lower net cost 100% utilization of generics for these drugs would save $61 million

25 Real World Findings Reducingpharmacyreimbursement reimbursement would reduce Medicaid expenditures Significant variation amongstates Generics are not necessarily less costly than brands targeted approach most cost effective take advantage of inflation penalties

26 Generic Drugs Targeted Approach DRUG 1ST GENERIC FUL NO SMAC MODERATE SMAC AGGRESSIVE SMAC A 2005 X $ $ $ 7.02 $ B 2007 $ $ $ $ C 2008 X $ $ $ 9.06 $ D 2008 X $ $ $ $ E 2009 $ $ $ $ F 2009 X $ $ $ $ G 2009 X $ $ 7.79 $ 5.54 $ H 2009 $ $ $ $ I 2009 $ $ $ $ J 2010 $ $ $ 8.09 $ K 2010 $ $ $ $ L 2011 $ $ 8.12 $ 7.48 $ M 2011 $ $ $ $ N 2011 $ $ 9.33 $ 1.82 $ BN

27 OIG Report August 2011 Higher Rebates For Brand Name Drugs Result in Lower Costs for Medicaid Compared to Medicare Part D Comparison of pharmacy reimbursement, rebates and net costs in Medicaid vs Medicare Part D 100 high h expenditure brand and 100 high h expenditure generic drugs

28 OIG Report Findings Pharmacy Reimbursement Brands median Medicaid reimbursement 1% higher than Part D 70% of drugs less than 2% difference in reimbursement 20% of drugs Mdi Medicaid idpaid 2 10% more 5% of drugs Medicaid paid >25% more Generics median Medicaid reimbursement 3% higher than Part D Wide variation between Medicaid and Part D for individual drugs Medicaid paid more for 62% of drugs; Part D paid more for 38% of drugs

29 Unit rebate amounts OIG Report Findings Brand Rebates Median 3X higher in Medicaid 25% ofdrugs >5Xhigher 98% of brands had CPI U penalty Accounted for 55% of total rebate

30 Net Costs OIG Report Findings Brand Drugs Medicaid lower for 93% of brand drugs Expenditures Rebates Rebates as %of Expenditures Medicaid $ 6.4 billion $2.9 billion 45% Medicare $24.0 billion $4.5 billion 19%

31 Managed Care and Medicaid Rebates

32 Medicaid Managed Care Argument for carve in Argument for carve in Capitated MCO contracts can improve predictability of state budgets Lower pharmacy reimbursement Lower utilization (Rx per beneficiary) Higher GDR Evidence of MCO cost savings Mixed results per person spending, quality of care, utilization patterns

33 Impact of MCO on Rebates PHARMACY FEDERAL STATE SUPPLEMENTAL NET COST TO REIMBURSEMENT REBATES REBATES STATE FFS FORMULARY $62.4 $34.8 $2.7 $24.9 MCO FORMULARY $58.9 $25.1 $0.0? All figures in millions

34 Optimized Formulary PHARMACY FEDERAL STATE SUPPLEMENTAL NET COST TO REIMBURSEMENT REBATE REBATE STATE FFS FORMULARY $62.4 $34.8 $2.7 $25.0 MCO FORMULARY $58.9 $25.1 $0.0? OPTIMIZED FORMULARY $59.7 $27.8 $2.1 $29.8 All figures in millions Optimized formulary can balance the state s rebates with the MCO s reimbursement

35 Formulary Management

36 PDL > > Formulary Management Rebate Optimization Federal Rebates Supplemental Rebates Multisource Drug Pricing/Tracking Expansion of PDL to include more classes FFS MCO Coordinated Formulary Specialty Pharmaceuticals